Universal Power Group Reports Improved Fourth Quarter and Full Year 2012 Results

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Universal Power Group Reports Improved Fourth Quarter and Full Year 2012 Results

COPPELL, Texas--(BUSINESS WIRE)-- Universal Power Group, Inc. (NYSE MKT: UPG), a Texas-based distributor and supplier of batteries and related power accessories and a third-party logistics provider, today announced significantly improved financial results for the fourth quarter and full year ended December 31, 2012. On a modest 3.8 percent increase in net sales, UPG nearly doubled income from continuing operations for the full year.

For the fourth quarter of 2012, UPG reported a much smaller net loss from continuing operations of $83,000, or $0.02 per diluted share, compared with a net loss from continuing operations of $470,000, or $0.09 per diluted share, in the fourth quarter of 2011. For the full year, UPG reported net income from continuing operations of $701,000, or $0.13 per diluted share, compared to net income from continuing operations of $368,000, or $0.07 per diluted share, in 2011.


"We made significant progress toward achieving our long-term strategic goals in 2012, even as we overcame a number of difficulties in our markets and supply base, resulting in a near doubling of income from continuing operations on a modest increase in net sales," stated Ian Edmonds, UPG's President and Chief Executive Officer. "During the year, we worked through significant supply chain issues that affected a number of our China-based suppliers, and which resulted in delays in delivering products to our customers. We were also able to refocus on building our core battery and power accessory business with the sale of Monarch and the continued growth of ProTechnologies (PTI). These accomplishments, combined with the flexibility of our new credit agreement, provide a solid foundation for growth in 2013."

Fourth Quarter and Full Year 2012 Results

Net sales for the fourth quarter decreased 4.4 percent to $19.9 million from $20.8 million in the fourth quarter of 2011. The slight reduction in net sales in the quarter was primarily the result of a decrease in net sales to ADT and its authorized dealers as well as softer sales in certain retail channels, which was offset by an increase in PTI sales.

Gross profit increased to $3.9 million in the quarter, compared with $3.8 million in the fourth quarter of 2011, due mainly to a shift in product mix toward higher margin products and improvements in UPG's supply chain. As a percent of net sales, gross margins improved to 19.4 percent from 18.1 percent in the prior year's fourth quarter. Operating expenses were reduced to $3.8 million in the fourth quarter of 2012, from $4.3 million in the fourth quarter of 2011. The reduction in operating expense included decreased facilities costs, professional and legal expenses.

Despite softer sales, UPG reported operating income of $30,000 for the quarter, compared to an operating loss of $550,000 in the fourth quarter of 2011. Interest expense was $120,000 in the period, resulting in pre-tax loss of $90,000 for the fourth quarter of 2012, compared to a pre-tax loss of $670,000 in the prior year. The Company reported a net loss from continuing operations of $83,000, or $0.02 per diluted share, a significant improvement from the net loss from continuing operations of $470,000, or $0.09 per diluted share reported in the fourth quarter of 2011. Including discontinued operations, UPG reported a net loss of $83,000, or $0.02 per diluted share in the fourth quarter of 2012, compared with a net loss of $497,000, or $0.10 per diluted share in the fourth quarter of 2011.

For the full year of 2012, net sales grew 3.8 percent to $91.9 million from $88.6 million in 2011. The increase was attributable to a rise in sales to new and existing customers and sales by PTI, and was offset by a decrease in sales to ADT and its authorized dealers and certain retail channels during 2012.

Primarily as a result of the remaining effects of supply chain issues affecting the Company in early 2012, gross profit decreased to $16.3 million, or 17.7 percent of net sales, compared to $17.2 million, or 19.4 percent of net sales for the full year of 2011. Total operating expenses decreased $1.1 million, or 7.2 percent, to $14.7 million from $15.8 million in the prior year. Operating expenses for 2012 decreased as a result of reductions in depreciation and facilities costs, as well as reduced professional and legal expenses with the settlement of outstanding legal issues earlier in the year.

For the full year of 2012, UPG reported operating income of $1.6 million and pre-tax income of $1.1 million, compared to operating income of $1.4 million and pre-tax income of $790,000 in 2011. The increase in operating income in 2012 was due primarily to increases in net sales and improvements in operating expenses, which were partially offset by reduced gross profit. For 2012, UPG reported a near doubling of net income from continuing operations to $701,000, or $0.13 per diluted share, compared to net income from continuing operations of $368,000, or $0.07 per diluted share in 2011. Including discontinued operations, UPG reported net income of $155,000, or $0.03 per diluted share in 2012, compared to net income of $214,000, or $0.04 per diluted share in 2011.

Balance Sheet and Financial Position

At December 31, 2012 inventory was $30.4 million, a increase of $6.2 million, from $24.2 million at December 31, 2011. The increase marked a return to a more normal level of inventory from the artificially low inventory levels at the end of 2011 that resulted from the disruption in product shipments from the Company's China-based suppliers. Accounts receivable decreased to $8.8 million, from $13.0 million at the end of 2011. Accounts payable increased slightly, to $7.2 million from $6.8 million during the period. Total working capital increased to $23.7 million, from $19.9 million at the end of 2011, reflecting a more stable level of investment to support UPG's growth.

For the full year of 2012, UPG used net cash from operating activities of $1.4 million, compared to cash provided by operations of $6.7 million during 2011. The decrease in operating cash flow for 2012 was driven by the replenishment of inventory, along with a decrease in accrued liabilities, which was partially offset by an decrease in accounts receivable and an increase in accounts payable. UPG ended 2012 with $2.1 million in cash and cash equivalents, up from $283,000 at the end of 2011. The outstanding balance on UPG's line of credit decreased slightly to $12.2 million, compared to $12.7 million at the end of 2011, reflecting the refinancing of $4 million to a term loan during the fourth quarter of 2012.

Edmonds concluded: "We are pleased with our accomplishments for 2012, as we made great progress in setting UPG on the path toward long-term growth and profitability. We successfully managed through the impact of industry-wide supply issues in China, and rebuilt our inventory to more normal levels by the end of the year. We exited the Monarch hunting business with the goal of refocusing our resources on our core business of batteries and related power accessories. One of the first steps we made in that process was the acquisition of the Kinetik brand of high-end power products at the end of the year, which we believe will provide UPG with solid growth opportunities. Overall, we have set a solid foundation for UPG to increase sales and bottom-line results over the long term, leaving us confident in our efforts for 2013 and beyond."

Conference Call Information

Universal Power Group will host an investor conference call today, Thursday, March 28, 2012 at 11:30 a.m. ET (10:30 a.m. CT) to discuss the Company's financial results for the fourth quarter and full year ended December 31, 2012.

Interested parties may access the conference call by dialing 1.800.322.2803, passcode 97547021. The conference call will also be broadcast live at www.upgi.com and through the Thomson StreetEvents Network. Individual investors can listen to the call at www.earnings.com, Thomson's individual investor portal. Institutional investors can access a webcast of the call via Thomson StreetEvents (www.streetevents.com), a password-protected event management site.

A replay of the conference call will be made available through April 4, 2013 by calling 1.888.286.8010, passcode 76646056, and an archived webcast will be available at www.upgi.com.

About Universal Power Group, Inc.

Universal Power Group, Inc. (NYSE MKT: UPG) is a leading supplier and distributor of batteries and power accessories, and a provider of supply chain and other value-added services. UPG's product offerings include proprietary brands of industrial and consumer batteries of all chemistries, chargers, jump-starters, 12-volt accessories, and solar and security products. UPG's supply chain services include procurement, warehousing, inventory management, distribution, fulfillment and value-added services such as sourcing, battery pack assembly and coordinating battery recycling efforts, as well as product development. For more information, please visit the UPG website at www.upgi.com.

Forward-Looking Statements

Statements in this press release that are not statements of historical or current fact constitute "forward-looking statements." Such forward-looking statements involve known and unknown risks, uncertainties and other unknown factors that could cause the Company's actual operating results to be materially different from any historical results or from any future results expressed or implied by such forward-looking statements. In addition to statements that explicitly describe these risks and uncertainties, readers are urged to consider statements that contain terms such as "believes," "belief," "expects," "expect," "intends," "intend," "anticipate," "anticipates," "plans," "plan," to be uncertain and forward-looking. The forward-looking statements contained herein are also subject generally to other risks and uncertainties described from time to time in the Company's filings with the Securities and Exchange Commission. Historical financial results are not necessarily indicative of future performance.

  

 

UNIVERSAL POWER GROUP, INC.

CONSOLIDATED BALANCE SHEETS


(Amounts in thousands except share data)

 

ASSETS

 
December 31,
2012   2011 
CURRENT ASSETS
Cash and cash equivalents$2,069$283
Accounts receivable:
Trade, net of allowance for doubtful accounts of $324 and $3848,84712,972
Other455442
Inventories - finished goods, net of allowance for obsolescence of $423 and $83030,39624,174
Current deferred tax asset838972
Income tax receivable512721
Prepaid expenses and other assets970 1,426 
Total current assets44,08740,990
 
PROPERTY AND EQUIPMENT
Logistics and distribution systems1,9081,871
Machinery and equipment7091,044
Furniture and fixtures518511
Leasehold improvements395389
Vehicles111 171 
Total property and equipment3,6413,986
Less accumulated depreciation and amortization(3,173)(3,128)
Net property and equipment468858
 
GOODWILL1,3871,387
INTANGIBLES, net593527
OTHER ASSETS155100
NON-CURRENT DEFERRED TAX ASSET357 213 
2,492 2,227 
TOTAL ASSETS$47,047 $44,075 
  

 

UNIVERSAL POWER GROUP, INC.

CONSOLIDATED BALANCE SHEETS (CONTINUED)


(Amounts in thousands except share data)

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 
December 31,
2012  2011 
CURRENT LIABILITIES
Line of credit$12,188$12,654
Accounts payable7,2316,845
Accrued liabilities3861,227
Current portion of settlement accrual241
Current portion of capital lease and note obligations620119 
Total current liabilities20,42521,086
 
LONG-TERM LIABILITIES
Capital lease and note obligations, less current portion3,608229 
 
TOTAL LIABILITIES24,03321,315
 
COMMITMENTS AND CONTINGENCIES
 
SHAREHOLDERS' EQUITY
Common stock - $0.01 par value, 50,000,000 shares authorized, 5,020,000 shares issued and outstanding5050
Additional paid-in capital16,39016,339
Retained earnings6,5746,419
Accumulated other comprehensive loss(48)
Total shareholders' equity23,01422,760 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$47,047$44,075 
    

UNIVERSAL POWER GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands except per share data)

 
Three Months Ended

December 31,

Year Ended

December 31,

2012   2011  2012   2011 
Net sales$19,895$20,816$91,930$88,601
Cost of sales16,045 17,050 75,661 71,399 
Gross profit3,8503,76616,26917,202
 
Operating expenses3,820 4,316 14,703 15,840 
 
Operating income (loss)30(550)1,5661,362
 
Interest expense(120)(113)(561)(565)
Other, net (7)129 (7)
Total other expense, net(120)(120)(432)(572)
 
Income (loss) from continuing operations before provision for income taxes(90)(670)1,134790
Provision for income taxes7 200 (433)(422)
Income (loss) from continuing operations(83)(470)701368
Discontinued operations:
Loss from operations of discontinued Monarch Outdoor Adventures, LLC (including loss on disposal of $616 in Q2 2012)(47)(707)(234)
Provision for income taxes 20 161 80 
Loss on discontinued operations (27)(546)(154)
Net income (loss)$(83)$(497)$155 $214 
Net income (loss) per share
Basic:
Income (loss) from continuing operations$(0.02)$(0.09)$0.14$0.07
Loss from discontinued operations$ $(0.01)$(0.11)$(0.03)
Net income (loss)$(0.02)$(0.10)$0.03$0.04
Diluted:
Income (loss) from continuing operations$(0.02)$(0.09)$0.13$0.07
Loss from discontinued operations$ $(0.01)$(0.10)$(0.03)
Net income (loss)$(0.02)$(0.10)$0.03$0.04
Weighted average shares outstanding
Basic5,0205,0205,020
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